Extra liquidity is available for taxpayers under the tax new regime

The Union Budget has been a subject of intense scrutiny this year, with particular focus on the government’s approach to stimulating consumption. While there was no explicit, large-scale consumption boost, the Finance Minister argued that the tax reforms introduced in the budget indirectly serve this purpose.

At the India Today-Business Today Budget Round Table 2024, Ravi Agarwal, Chairman, CBDT, was questioned about examining the government’s rationale and the potential impact of the changes on consumer spending.

The chairman explained, from a tax perspective, the new tax regime offers several benefits to taxpayers. By simplifying the tax slabs and eliminating many deductions, individuals have more disposable income. This increased liquidity provides taxpayers with greater flexibility to choose how to spend or invest their money.

Additionally, the government forgoes a significant amount of revenue due to these changes. For instance, taxpayers earning around 15 lakhs annually benefit from a tax reduction of approximately 10,000 rupees. When considering additional deductions available to salaried individuals, the government’s revenue loss increases to about 25,000 rupees per taxpayer.

Ravi Agarwal, Chairman, CBDT, said, “Well, if you refer it from a tax point of view, the revenue forgone on the context of those tweaking the slab rates and consequential benefit of tax, that is, extra liquidity that is available to the taxpayer.”

“The new tax regime gives taxpayers more freedom over their money. They can choose how to spend or invest their income without needing to make specific investments just to save on taxes,” he added further.

In conclusion, while the Union Budget did not feature a direct consumption stimulus, the government’s tax reforms aim to indirectly boost consumer spending. By providing taxpayers with increased disposable income, the budget seeks to stimulate economic activity.

Source: bt Business Today